Tesla stock jumped over 8% in morning trading as Morgan Stanley analyst Adam Jonas told clients that the company is still set to lead the EV industry in 2023.
He cited “valuation, cash flow, innovation and cost leadership” as key reasons to maintain a Buy-equivalent rating. Jonas noted that the steep sell-off for Tesla (TSLA) as of late is driven by a flip of the dynamics for supply and demand, prompting lowered prices and more pressure on the business in key markets like China. However, he advised Tesla (TSLA) should still succeed under these conditions.
“We believe 2023 is shaping up to be a 'reset' year for the EV market where the last 2 years of demand exceeding supply will be substantially inverted to supply exceeding demand. Within this environment, we believe players that are self-funded with demonstrated scale and cost leadership throughout the value chain can be relative winners,” Jonas wrote. “We believe Tesla may be in position to extend its lead versus the EV competition in FY23 even before consideration of [Inflation Reduction Act] benefits where Tesla also stands out as the biggest potential winner.”
He noted that the Buy-equivalent rating contrasts with a Hold-equivalent assigned to Fisker (FSR) and Sell-equivalents for Lucid (LCID) and QuantumScape (QS). Jonas also expects Tesla to outperform legacy automakers and maintain its pole position despite tougher sales conditions.
Still, the price discounting for autos and lower value of Tesla’s (TSLA) adjacent businesses as reason enough to reduce his price target. He trimmed his target to $250 from a prior $330 on the basis of these factors despite remaining bullish on the stock.
Tesla (TSLA) stock ticked higher on significant trading volume. The gain would add to an over 3% rise on Wednesday that snapped a lengthy losing streak in mid-December that left shares at a multi-year low.